Bitfarms Implements Shareholder Plan Amid Riot Takeover Bid

Bitcoin mining company Bitfarms has recently introduced a shareholder rights plan, a strategic move that comes just 10 days after its Annual General and Special Meeting. This plan is specifically designed to make any hostile takeover attempts, such as the one from Riot Platforms, significantly more challenging, although not entirely impossible. The details of this plan create a high barrier for such attempts to proceed.

The shareholder rights plan has specific provisions that kick in if an entity, legally considered a person along with associated persons, acquires 15% of Bitfarms’ shares by September 20, and then increases their stake to 20% without the board’s approval. If this scenario occurs, the other shareholders would be granted the right to buy additional shares at a substantial discount relative to the current market price. This strategy aims to dilute the holdings of the hostile bidder.

In a broader context, a takeover bid remains legally permissible under Canadian laws after the initial protective measures are exhausted. During this interim period, the potential acquirer’s share would face dilution, reducing its effectiveness. Riot Platforms previously criticized Bitfarms’ board by claiming that they had dismissed Riot’s takeover proposal from April without adequate discussion.

According to Bitfarms’ narrative, while they acknowledged Riot’s interest, they found the offer significantly undervalued the company’s shares. This disagreement led Riot to alter its strategy, choosing not to partake in the peaceful resolution process it initially proposed. Instead, Riot continued to buy common shares in the open market, which Bitfarms claims undermined the process’s integrity and potential third-party interest.

Riot Platforms had been able to increase its ownership in Bitfarms from a modest 3.61% to a more influential 11.62% by the time of the shareholders’ meeting. In an interesting turn of events, Bitfarms co-founder Emiliano Grodzki lost his board seat in the subsequent election during that meeting. Riot had previously called into question whether Grodzki and Nicholas Bonta were genuinely acting in the best interests of all shareholders.

Despite these contentions, Bonta managed to secure his position as board chair with a significant margin. Bitfarms noted that concerns about independence highlighted by certain proxy advisory firms might have influenced Grodzki’s failure to get re-elected.

In the build-up to the meeting, Riot Platforms had also expressed its intention to push for an additional shareholders’ meeting following the initial May 31 meeting. Their aim was to further influence the board composition by adding more members sympathetic to their vision.

On June 10, Bitfarms released a statement addressing these developments and reaffirmed its shareholder rights plan. The company described Riot Platforms’ quest for an additional shareholders’ meeting as part of a broader scheme to bypass and frustrate the board’s meticulous review process for considering a potential sale of the company.

The evolving tussle between Bitfarms and Riot Platforms reflects the complex dynamics and strategic maneuvering common in high-stakes corporate governance and acquisition scenarios. The shareholder rights plan stands as Bitfarms’ robust defense mechanism to maintain control and ensure that any takeover attempt would face significant hurdles.